At the suggestion of a fellow Fool, here comes a whopper. I need advice on our retirement plan, so I'm serving up the whole sticky mess on a platter for you all. I apologize in advance for a long post, which I'm placing on two message boards.

My wife and I are in our mid-40s, we have 2 small kids and hope to retire at 50 (January, 2006). As we are less than 6 years away, much advice relative to our strategy suggests we soon start shifting some money from stocks to fixed income assets to ensure a minimum income.

Essentially, my question is basic: how and when do I start to re-allocate our portfolio to ensure the minimum income we want at age 50? Is there a strategy for shifting assets as you approach retirement?

Here's our current situation, and overall strategy for some perspective:

We have $390,000 in taxable accounts, 85% of which is in individual stocks (a tiny portion is in a mutual fund). The rest is in cash and bond funds.

We have $78,500 in tax deferred accounts: two 403bs totaling $68,500, and a 457b totaling $10,000. Currently, 40% of the total is in guaranteed interest accounts. The rest in domestic and international stock index funds, and one managed global stock fund. My wife also has $6,200 in a regular IRA in a money market fund.

The current sum of the above accounts—$474,700—is the money we'd initially draw from when we retire at 50. (It is NOT our total net worth, and is only part of our overall strategy.)

We want this money to grow over the next 6 years, but I'm concerned about our lopsided (80%) exposure to the stock market. I have nightmares of getting hit by a five year bear market between now and retirement. Such a scenario would slaughter our principal, and keep us working past 50.

The dream scenario for this part of our strategy is the taxable accounts grow 6 - 10% annually, growing to $525,000 - $625,000 at 50. I'd put $300K - $400K in fixed income assets. The rest I'd leave in stocks as a hedge against inflation, and wouldn't touch unless needed.

We contribute $16,000 annually to our TDA's. A low 5% return would produce $130,000 in the two 403bs, $58,000 in the 457b, and $8,000 in the IRA by 50. I'd roll both 403bs into the IRA, giving us $138,000; plus my 457b of $58,000. A total of $196,000. We'd take Substantially Equal Periodic Payments from the IRA, and take my 457b over a fixed period of time (not as an annuity).

I'm shooting for income of $30-35k at age 50 (depending on total return and prevailing interest rates).

It's important to note the rest of our strategy: We have other assets we intend to draw on in a laddered fashion in later years—real estate, Roth IRAs, Social Security (if it still exists by then), and our house (which is paid for). At each rung of the ladder, our income should exceed expenses, and surpluses would be set aside in a contingency fund. Long term, I'm confident about our retirement finances, but very anxious about the assets we need at 50. We still need growth, but have little room for risk. If we screw up, we'll work beyond 50. I'll surely die from a stress related disease if that happens.....!

How would you re-allocate our age-50 assets over the next 5-6 years, and then beyond? And what do you think of our overall strategy?

Sorry for the long post, but this is the whole enchilada for us. It's taken months to get organized enough to provide the above outline, and naturally, I'm full of doubts. (I'm also wrestling with how to consolidate accounts to make things easier to manage....)

I've left out some details, but this post is long enough. I'll be glad to fill in any blanks should anyone request them.

<<I've left out some details, but this post is long enough. I'll be glad to fill in any blanks should anyone request them.

I know there are valuable opinions out there, so please blast away! >>

LOL. Yeah, I'd say you left out a lot. Too much for any meaningful comments by anyone. Still, I'm glad you also posted this query on The Retire Early Homepage board because I'm sure you will get some useful tips there.

You hope for a $625K portfolio in six years from which you wish to take at least $35K per year. Understand that income is about 5.6% of your portfolio, and that's a rate at the upper limits of a sustainable withdrawal rate to ensure your portfolio lasts as long as you do. I suggest you play with the withdrawal rate spreadsheet you will find at the Retire Early site at http://www.geocities.com/WallStreet/8257/safesum.html. That will give you a great idea of what you can do.

"Yeah, I'd say you left out a lot. Too much for any meaningful comments by anyone."

Many thanks for your reply. I'm familiar with the withdrawal rate spreadsheet you recommend.

But if you can, tell me what specifics to add, and I'll try to add them. I need to know if my plan is too complicated and needs to be simplified, and how to reallocate assets as I get closer to retirement.

Nothing really as I wouldn't give advice, just comments. However, your basic concern seems to be one of allocation between stocks and fixed income investments. IMHO that allocation isn't a lot different in retirement than it is while you're still working.

Stocks produce the greatest returns over time, but they are volatile in the short-term. Therefore, most Fools would say you should not invest ANY money in stocks that you know as an absolute fact you will spend in the next three to five years. The rest goes into stocks. And that philosophy holds before and after retirement.

I've written extensively on the topic. If you wish to spend some time reading, try these URLs:

"I'm shooting for income of $30-35k at age 50 (depending on total return and prevailing interest rates)."

While you gave a lot of info, some of things that I consider when I try to calculate what I need for retirement are some of the things you may have considered but did not mention.

I am trying to balance being conservative enough that if I retire I will not have to live significantly below my means while also not working much longer than I need to assure that such happens.

While I have selected 5% as a targetted withdrawal rate that is to provide 110% of my estimated salary at time of retirement. If I would take only 4% withdrawal that would provide me with 90% of my estimated salary at retirement.

There is the issue of future expenses. All of my children will be out of high school. Only one will be in college. My home will be paid off and we have no other debt.

30K to 35K in 10 years with a 3% inflation is only worth $22K to $26K today. If your present salary is $22k to $26k today then it might be feasible that $30K to $35K would be doable.

Also as children grow into adolescents and teens, the costs go up. If you have taken care of college costs as part of your savings plan then you may make it work.

I sense that your concern at this point - over 10 years away that retirement worries over investment principle retention may be even more stressful than your job.

You have an excellent start and you will probably do the things you need to do so that you can retire in 10 years. Remember there is alot of maneuverability and flexibility over a 10 year time span.